A special report on the news industry: How newspapers are faring

A little local difficulty

American newspapers are in trouble, but in emerging markets the news industry is roaring ahead

Jul 7th 2011 | from the print edition

“WHO KILLED THE newspaper?” That was the question posed on the cover of The Economist in 2006. It was, perhaps, a little premature. But there is no doubt that newspapers in many parts of the world are having a hard time. In America, where they are in the deepest trouble, the person often blamed is Craig Newmark, the founder of Craigslist, a network of classified-advertising websites that is mostly free to use. Mr Newmark has been called a “newspaper killer” and “the exploder of journalism”, among other things. The popularity of Craigslist, the ninth most popular website in America, has contributed to a sharp decline in newspapers’ classified-advertising revenue (see chart 1)—a business where many newspapers have had comfortable local monopolies for decades. Sitting in a café in San Francisco, Mr Newmark looks an unlikely assassin. Did he kill newspapers? “That would be a considerable exaggeration,” he says with a smile.

The internet-driven fall in classified-ad revenue is only one of the reasons for the decline of newspapers in America, which started decades ago (see chart 2). The advent of television news, and then cable television, lured readers and advertisers away. Then the internet appeared in the 1990s. A new generation of readers grew up getting their news from television and the web, now the two leading news sources in America (the web overtook newspapers in 2010 and is already the most popular source among the under-30s).

These technological shifts hit American newspapers particularly hard because of their heavy reliance on advertising. According to the OECD, a club of developed countries, in 2008 America’s newspapers collectively relied on advertising for 87% of their total revenue, more than any other country surveyed. The 2008-09 recession made things worse. Between 2007 and 2009 newspaper revenues in France fell by 4%, in Germany by 10% and in Britain by 21%. In America they plummeted by 30%. On top of that, a series of mergers and acquisitions in the American newspaper business left many companies saddled with huge debts and pushed several into bankruptcy.

For American regional and metro-area newspapers, further job cuts, closures and consolidation now seem likely. In retrospect it is clear that the industry became too dependent on local advertising monopolies. “The real trouble that a lot of US news organisations have is that they are defined by geography—by how far trucks could go to deliver papers in the morning,” says Joshua Benton, head of the Nieman Journalism Lab at Harvard University. The internet has undermined that business model by providing alternatives for both advertisers and readers.

The health of newspapers is particularly important because they tend to set the agenda for other news media and employ the most journalists. In America, for example, the national television networks had around 500 journalists on their staff in 2009, compared with more than 40,000 for daily newspapers (down from 56,000 in 2001). But it would be wrong to conclude from the woes of American newspapers that newspapers and news are in crisis everywhere.

“The United States is the worst case that we see worldwide, and a lot of media news comes out of the US, so it is exceedingly negative. But the US experience is not being replicated elsewhere,” says Larry Kilman, deputy head of the World Association of Newspapers (WAN), an industry body. “There’s an assumption that there’s a single crisis affecting all news organisations, and that’s not the case,” says David Levy, director of the Reuters Institute for the Study of Journalism at Oxford University. “There are different kinds of crisis in different countries, and some countries in the developing world are experiencing expansion rather than decline.”

Newspapers in western Europe are having to manage long-term decline rather than short-term pain. In Germany, the biggest market, a 10% drop in revenue amid the worst recession in a generation “is not a terrible result”, says Rasmus Kleis Nielsen, a colleague of Mr Levy’s at the Reuters Institute and co-author with him of a recent book, “The Changing Business of Journalism and its Implications for Democracy”. That does not mean the German industry is immune to long-term changes. “But broadly speaking, the German industry has a large and loyal audience, strong brands and editorial resources to manage that transition,” says Mr Nielsen. Many European newspapers are family-owned, which helps to protect them in difficult times.

In Japan, home to the world’s three biggest-selling daily newspapers (the Yomiuri Shimbun alone has a circulation of more than 10m), circulation has held up well, in part because over 94% of newspapers are sold by subscription. But there is trouble on the horizon. Young Japanese do not share their elders’ enthusiasm for newsprint, and advertising revenues are dropping as the population ages.

The number of newspaper titles in Russia increased by 9% in 2009, but it might be no bad thing if a few newspapers died, particularly those “useless” titles that are merely mouthpieces for the local authorities that fund them, says Elena Vartanova, dean of the journalism school at Moscow State University. The Kremlin controls 60% of Russia’s newspapers and owns stakes in all six national television stations. In a country where newspapers were traditionally used as propaganda tools, online news sites offer an opportunity to break with the past. But there is a clear divide between the internet-savvy youth, who get their news online, and the old and rural populations, who depend on state-run television.

Hungry for news

There is certainly no sign of a news crisis in India, now the world’s fastest-growing newspaper market. Between 2005 and 2009 the number of paid-for daily newspapers in the country increased by 44% to 2,700 and the total number of newspapers rose by 23% to more than 74,000, according to the WAN. In 2008 India overtook China to become the leader in paid-for daily circulation, with 110m copies sold each day. Newspaper and magazine advertising expenditure increased by 32% in the year to June 2010, according to Nielsen India, a market-research firm.

Television news is also booming: of more than 500 satellite channels that have been launched in India in the past 20 years, 81 are news channels. The field is dominated by private firms with interests in both news and entertainment media, so the emphasis is on sensationalist, “Bollywoodised” coverage of celebrities, says Daya Thussu at the University of Westminster in London. Most news outlets are openly partisan. Thanks to India’s vast population, there is scope for growth in print media for years to come. “Indian publishers come to newspaper conferences and complain that it’s too focused on digital, not enough on print,” says Mr Kilman. But Mr Levy wonders whether the greater interest in news in fast-growing India and Brazil will prove to be a short-term phenomenon that will be undermined by the spread of internet access.

China is another market where news media are growing rapidly, but the strict controls on them have intensified in recent months. A private media industry was allowed to develop only in the 1990s. The combination of social change, increasingly savvy readers, a booming advertising market and the need to reconcile credibility among readers with state controls has created a very confusing environment, says David Bandurski at the University of Hong Kong. Media firms must dance skilfully “between the party line and the bottom line”, in the memorable phrase of Zhao Yuezhi, an analyst of the Chinese media scene.

Officially the state permits watchdog journalism, known as “supervision by public opinion”, but in practice news outlets are wary of offending local party officials. One way around this used to be for reporters to expose wrongdoing in other provinces, but a ban on “cross-regional” reporting put an end to that. Journalists must identify areas where muckraking will be permitted by officials, or ensure that their own political connections will provide them with sufficient cover.

A new tactic, which became particularly popular in China during 2010, is the use of microblogging services to release information anonymously in small chunks, notes Ying Chan, dean of the journalism school at Shantou University in China. Twitter is banned in China, so this is done using local clones of the service. Microblogging works well in China because it can be done on mobile phones, which are widespread, and Chinese characters allow an entire paragraph to be packed into a short message. Moreover, microblog posts are difficult to censor because they may not make sense unless they are all read in order.

Ms Chan describes the future for Chinese journalists as “both promising and perilous”. Journalists elsewhere would agree, though for different reasons. Like Tolstoy’s unhappy families, all unhappy in their own way, the news business faces different problems in different countries. To survive, news organisations will have to make the internet part of the solution.